By Gina Lee
Investing.com – The dollar was up on Wednesday morning in Asia after recording two days of losses. Meanwhile, the U.S. Federal Reserve, including Chairman Jerome Powell, sought to reassure markets that the tighter monetary policy hinted at in the Fed’s latest policy decision was still some way off.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.13% to 91.873 by 1:10 PM ET (5:10 AM GMT).
The USD/JPY pair edged up 0.15% to 110.81. The Bank of Japan released the minutes from its own monetary policy meeting earlier in the day, with Japan also releasing both its manufacturing and services purchasing managers’ index for June. The manufacturing PMI stood at a lower-than-expected 51.5.
The dollar index is currently off a two-month high reached at the end of the previous week. The greenback has now given up about a third of the gains posted since the Fed sprung an unexpectedly hawkish tone in its latest policy decision.
With interest rate hikes and asset tapering now expected to begin sooner than expected, Fed officials acted to calm investor concerns.
Powell and New York Fed President John Williams both cautioned that further economic recovery is a prerequisite to any asset tapering and interest rate hikes. "We will not raise interest rates pre-emptively because we fear the possible onset of inflation... we will wait for evidence of actual inflation or other imbalances,” Powell said on Tuesday in his testimony before the House of Representatives Select Subcommittee.
For his part, Williams echoed that the Fed will closely monitor economic data to determine the appropriate point to begin adjusting monetary policy. "That's still quite a ways off,” he added.
Some investors were cautiously optimistic in their response to the Fed comments.
"Latest smoke signals from the Fed ... all point to September as the meeting when the Fed is, on current trends, most likely to declare that substantial further progress towards their goals has been achieved, or is being achieved," National Australia Bank (OTC: NABZY ) head of foreign-exchange strategy Ray Attrill said in a note, which also forecasts tapering will likely start in early 2022.
"Their comments have seen markets row back somewhat from their largely position-driven convulsions last week,” the note added.
Investors now await the Bank of England’s policy decision , due to be handed down on Thursday.
Benchmark 10-year U.S. Treasury yields edged lower in Asia to 1.4616%, down from the 1.5940% peak hit during the previous week.
In cryptocurrencies, bitcoin hovered around the $33,700 mark. It had tumbled as low as $28,600 on Tuesday for the first time since early January 2021 as China intensified a crackdown on the sector.
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